SEBI bars First Overseas Capital from securities market for violating norms
The company has been directed to pay Rs.20 lakh penalty within 45 days
The Securities and Exchange Board of India (SEBI) has barred merchant banker First Overseas Capital Limited (FOCL) from the securities market for two years. It has also imposed a penalty of Rs.20 lakh for repeatedly violating regulatory norms.
The action was taken after two inspections held in August 2022 (covering April 2021 to March 2022) and February 2024 (covering April 2022 to October 2023).
The market regulator found numerous violations, including underwriting commitments exceeding 20 times the company’s net worth, participation in non-securities market activities, and failure to maintain the required Rs.5 crore minimum net worth.
Additionally, while blatantly violating the merchant banking laws, FOCL took deposits from the public to fulfil these commitments. It also failed to file half-yearly reports, provided false information, and neglected to confirm that its key managers had current NISM certifications.
Despite several warnings from SEBI in 2022 and 2023, the company continued with the deficiencies. The regulator observed incomplete track record disclosures on FOCL’s website, omitting key details such as issue type, subscription level, QIB holding, issuer financials, price data, and utilisation of issue proceeds. These violated SEBI’s public issue disclosure rules.
Thus, on instructions from the Securities Appellate Tribunal (SAT), the regulator noticed that FOCL had not complied with the net worth requirement since FY 2018-19. The persistent non-compliances posed possible risks to clients and investors.
SEBI has now prohibited FOCL for two years from accepting any new issue management assignments. Additionally, the company must pay Rs.20 lakh penalty within 45 days of receiving the order and close all open derivative positions within three months.